This week: Intellectual Ventures gets a major financial infusion for its single actual, non patent-enforcing business; a Federal Circuit decision says false marking plaintiffs who sue over expired patents still have viable cases, but will be hard pressed to win; and President Obama’s Department of Justice makes its distaste for drug reverse-payment settlements clear.


INTELLECTUAL VENTURES SPINS OFF AN ACTUAL COMPANY

The New York Times’s Dealbook blog reported this week that an early-stage company that is developing nuclear power technology, TerraPower, just received a $35 million infusion of venture capital. TerraPower is a spinoff of Intellectual Ventures, the giant patent-holding company founded by Nathan Myhrvold.

While Myhrvold has consistently maintained since launching IV that his ultimate goal is to use IP rights to create spinoff companies, TerraPower is the only spinoff IV has ever been able to point to whose business involves more than the looming threat of patent enforcement ( breathless coverage by Malcolm Gladwell notwithstanding).


Even the TerraPower investment is dwarfed by the size of IV’s true business—the business of stockpiling patents—which by some estimates has blown through about $5 billion in investments from operating companies—with those investors not having any clear indication of how they’re going to recoup their investment, other than perhaps by lining up more, ah, “investors.” Meanwhile, even as its lone operating spinoff attractred new backing this week, IV’s patent gobbling showed no signs of slowing down.


EXPIRED PATENTS WON’T KILL FALSE MARKING SUITS


With hundreds of companies being hit with lawsuits in recent months for allegedly marking their products with “false” patents, perhaps the most important question hovering over this particular wave of litigation has been: Can a product really be considered falsely marked just because the once-valid patent number stamped on it has expired? After all, statistics compiled by Docket Navigator show that expired patents are the basis of more than 80 percent of these so-called false-marking suits. (The balance of the complaints cite patents that don’t actually cover the marked product, or are invalid.)

As reported in last week’s Patent Litigation Weekly, many of the suits were brought by lawyers or just-formed companies owned by lawyers. Right around the time we published that column, a panel of judges from the U.S. Court of Appeal for the Federal Circuit issued a decision in a closely watched case with significant implications for the false-marking litigation. As our colleagues at The Am Law Litigation Daily reported this week, the appellate court’s ruling was hardly good news for the bevy of false-marking plaintiffs that have emerged in recent months.

In its decision, the Federal Circuit panel ruled against patent lawyer Matthew Pequignot, saying that, to be guilty of false marking, a defendant would have to be shown to “consciously desire” that the public be deceived, and that Pequinot had failed to prove that Solo acted in such a fashion. The court found instead that Solo only used the mark “to reduce costs and business disruption.” Noting that the false-marking statute is a criminal one (though punishable only by fines), the panel also held that “[t]he bar for proving deceptive intent here is particularly high.”

What got somewhat lost in the coverage of the Solo decision, though, was that the court found that a product marked with an expired patent is indeed “unpatented” and can therefore be subject to a false-marking suit. That suggests the defendants in these cases—companies from Revlon and Pfizer to Procter & Gamble and Wham-O—won’t have an easy time getting the suits thrown out at a very early stage of litigation, via a motion to dismiss, for example, though these defendants well wind up winning their cases on summary judgment. Which means defendant companies hit with suits over expired patents didn’t get the home run they were surely hoping for out of the Solo case—and are still facing some headaches.

OBAMA DOJ HITS HARD ON REVERSE-PAYMENT ISSUE

So-called reverse-payment settlements are deals that resolve patent suits between branded and generic pharmaceutical companies by giving the generic company something of value—cash, for instance, or a lucrative licensing deal—to drop a patent challenge. The Federal Trade Commission, led by chairman Jon Leibowitz, has long opposed these settlements—known by some as “pay-for-delay” deals—as “sweetheart” arrangements that violate antitrust laws and rob consumers of their right to inexpensive drugs once patents expire or are busted as invalid.

During the Bush administration, the Department of Justice took a view of pay-for-delay deals that opposed the FTC’s. That made the commission’s push to challenge the settlements in court difficult. Since the DOJ’s antitrust unit was taken over by Christine Varney, though, the two agencies seem to be on the same page on this issue. While an amicus brief [PDF] filed by the DOJ in an earlier federal court challenge made this new spirit of cooperation plain, the most recent brief [PDF] makes it even clearer.

That brief—filed in a class action brought against Bayer AG and two generic drugmakers over the antibiotic Cipro—cites FTC research on how delayed generic entry may be costing consumers as much as $3 billion per year. With that data as ammuniction, the DOJ urges the U.S. Court of Appeals for the Second Circuit to reconsider its current antitrust standard for pay-for-delay deals—established in a 2006 case involving the anti-cancer drug Tamoxifen—by saying that decision provides “sweeping antitrust immunity” that is “without justification in competition or innovation policy.”

The FTC hasn’t had much success in appellate courts yet, which have largely found that patent ownership means monopoly rights are just fine—even if they get divided up between duelling drug companies. And a plank in the health care reform bill passed earlier this year that would have banned “pay-for-delay” was removed just before passage.

For those interested in this subject, another valuable piece of reading material is the short and interesting brief filed on behalf of 86 law professors, which, like the DOJ brief, also calls for the Second Circuit to rehear the Cipro case en banc. The brief, authored by Stanford law professor and Durie Tangri litigator Mark Lemley, makes the point—which can’t seem to be made enough—that the U.S. Patent and Trademark Office doesn’t always get it right when issuing patents and that an issued patent represents only an initial judgment about an invention (or “invention,” as the case may be.) Almost half of patents litigated to judgment are ultimately held to be invalid, the law professors note.